Financial Support Mechanism Worst Case for Cypriots

The financial crisis has to be confronted to avoid entering the European Financial Support Facility because it is the worst case scenario for the entire Cypriot people, said President Demetris Christofias.

Commenting on a letter from Commissioner Olli Rehn warning that steps have to be taken to cut the deficit and avoid sanctions from the EU, Christofias said that Rehn is just doing his job, and the government also has to do its job. A mutual understanding must be reached on new austerity measures that will help fight the economic crisis, said the president, who has often been criticised for failing to take pro-active measures to limit the damage caused by an EU-wide economic slowdown and sovereign debt crisis.

The president remained non-committal on proposed austerity measures which are set to be submitted to Cabinet by Finance Minister Kikis Kazamias, saying that it is up to the House of Representatives "to show understanding".

But the crisis was brought home to Cyprus by the government and banking sector's exposure to Greek sovereign debt which is threatened by a default or partial default. This has been a catalyst for other underlying problems to come to the surface, including an expensive and inefficient public sector and a private sector that is overly dependent on expensive bank loans.

Opposition deputy leader Averoff Neophytou renewed his criticism of the government's failure to take quick action, saying that "our country is in unprecedented instability" and that the government is creating uncalculable dangers.

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